Is betting on horse racing a dying game or just a changing one?
Will the advent of sport wagering at a racetrack, in a casino or online where you live, bolster horse racing or continue to destroy it?
These questions have been a subject of considerable debate in recent years and have bubbled to the surface once more now that the sport will soon face widespread and significant competition from sports betting, as it is likely to become generally available nationwide.
A Harris Poll in January of 2016 found that only one percent of Americans claimed horse racing as their sport of choice, down from four percent in 1985 when it was in 8th place overall. In 2016, it ranked just after swimming and track and field as the 13th most popular sport.
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According to the Jockey Club, horse racing’s breed registry, the U.S. handle (the total amount of money wagered on races) peaked in 2003 at $15.2 billion. In 2015, that figure had plummeted to $10.6 billion then ticked upwards to $10.74 billion in 2016 and 2017 at $10.91 billion.
Advance Deposit Wagering (ADW) websites have seen double digit increases that are fueling the slight increase in overall handle in recent years. The problem is that the horsemen and the racetracks have effectively allowed the ADW outlets to take a significant cut of their action. The ADW’s get a piece when they accept the bet, so the track and the horsemen get less of the mobile wagering dollar compared to what they get if that dollar is wagered at the track.
ADW proponents note that they’ve grown the pari-mutuel market and that less of something is preferable to a larger percentage of nothing.
Other recent factors that may have caused racing pari-mutuel handle to stabilize are increasingly popular big days, such as the Kentucky Derby and the Breeders’ Cup and jackpot multi-race bets that produce big prizes for the winner, but syphon off money to a few individuals rather than to a larger group of winners more likely to push that money back through the pari-mutuel windows.
Those championing sports betting in various states believe that for legal sports wagering in regulated markets to be successful as possible, it needs to have a significant online component, as horse racing does, but some believe that if sports betting becomes convenient on mobile devices, it could provide competition that horse racing will be unable to fend off.
There seems to be a general consensus that, if reasonably taxed, sports wagering will be successful in the new regulated state markets. However, this success may come at the expense of horse racing wagering.
The Nevada experience seems to suggest that this is the case.
Nevada casino/resorts originally built race and sports books with more room for race betting than sports wagering. Now, most remodeled books feature a preponderance of room for sports bettors and fewer seats for race players.
Nevada race handle has steadily declined while sports book wagering sets a new handle record nearly every quarter.
While Nevada’s sports betting handle has enjoyed massive growth from $2.6 billion in 2007 to $3.4 billion in 2012 to $4.87 billion in 2017, the state’s racing wagering handle has endured a dramatic decline, sliced nearly in half, falling from $596.5 million in 2007 to $399.7 million in 2009 to $310.3 million in 2016.
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According to Nevada Gaming Control Board statistics, for the 12-month period between 8/1/16 and 7/31/17, there were 127 race books in Nevada, largely situated within 194 sports books.
The net profit that horse betting generates in Nevada is hard to know because the overhead of the books is proprietary information as is how expenses are divided between race and sports. The analytics are a little complicated, but although race betting generates about a 15 percent win race based on handle compared to about 5 percent for sports.
However, we do know, from Gaming Control Board reporting interpreted by Las Vegas Advisor website, that in the one-year period ending last July 31, the race books won a little less than $44 million from a handle (total wagers) of a little more than $297 million (a 15.3 percent win rate).
That’s compared to a sports betting win of $218 million on a win percentage of 4.81, from a handle of just under $6.2 billion.
Numbers clearly tell the story about the decline of horse racing wagering, but empirical evidence and personal observation display the sports’ problems to a greater degree.
Visitors and Las Vegas locals can easily notice that sports books are growing and race books are shrinking. A major casino executive whose property is home to one of Las Vegas’ largest and most successful race books told me many times he barely breaks even taking bets on horse racing, after expenses.
Often cited factors causing the decline are the high track take-out from the pari-mutuel pools, no more cash rebates to race players, too many race signals available with small fields and overwhelming favorites and an aging fan base.
Simply stated, when a Las Vegas race player passes away, there’s no warm body to take his place.
John Avello, Wynn Resorts top race and sportsbook executive, expertly explained the horse racing takeout problem recently to Todd Dewey of the Las Vegas-Review Journal: “What it comes down to is the takeout in horse racing on a win-place-show bet is 16-18 percent, and the takeout on an exacta bet could be anywhere from 19 to 26 percent,” he said. “The younger generation bets on sports with a theoretical hold of 4½ percent, and they’ve only got to bet on Team A or B.”
“Why are you going to make a bet at 8-5 on a favorite in a race with eight horses when you can put up $11 to make $10 and you’ve only got to beat one other team? The risk factor is not worth it to the younger generation, and that’s why I don’t think they’re in the game.”
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Major Las Vegas bookmakers such as Jay Kornegay (Westgate SuperBook race and sports); Tony Neville (Treasure Island); Ed Malinowski (Stratosphere, Arizona Charlies and Aquarius); Jay Rood (MGM Resorts) and others have often publicly professed their love of playing the horses and the sport itself. However, good business sense has forced them to emphasize sports betting at their establishments, at the expense of race betting.
If the Nevada experience shows anything, it clearly shows race wagering, without a better take-out deal for the bettors is likely to continue is diminution.
An expansion of sports wagering is unlikely to help racing solve its problems and may very well make them worse.
Robert H. Mann, a 31-year resident of Las Vegas, is the industry writer and columnist for Gaming Today newspaper and gamingtoday.com. His opinions are his own and may not reflect those of Sports Handle.
